Happy 4th anniversary for our journey out of debt!

And it IS happy. This anniversary feels different from the first three, and I think I know why.

For this anniversary, we are only dealing with our mortgage debt. No more consumer debt. No more business debt. That’s a first.

For this anniversary, we are backed up by an almost-full emergency fund – one that will see us through 3-6 months of possible income loss. That’s a first.

For this anniversary, we have less debt to pay off than we have already paid off. We’re well past the half way mark. That’s a first.

For this anniversary, we are focused on savings & investments as well as debt-reduction. We’re following Dave Ramsey’s steps, and when only the mortgage is left, significant savings start. The satisfaction of paying off debt is the redemption of past errors. The satisfaction of saving is the opening of future possibilities. We’re feeling our possibilities. That’s a first.

Four years ago, here is where we sat:

Start of June 2012: Total Debt = $257,400

Debt #1 New Car Debt – $8,600

Debt #2 Old Car & Course & Dog Debt – $12,800

Debt #3 Business Debt – $80,800

Debt #4 Mortgage – $155,000

End of May 2016: Total Debt = $106,700

Debt #1 New Car Debt – $0

Debt #2 Old Car & Course & Dog Debt – $0

Debt #3 Business Debt – $0

Debt #4 Mortgage – $106,700

We’ve paid off a total of $150,700, and we have $106,700 to go.

Our best year yet?

One of these days, I’ll make a graph of our progress, but for now, I’ll continue to list the numbers. Our average debt reduction per year has been $37,675, but our actual debt-reduction each year has varied quite a bit.

Year #1: $50,000 – The year of big motivation and no major expenses.

Year #2: $28,000 – The year of multiple major expenses: a new roof + a rotted tree cut down + our dog’s surgery + DH’s accountant’s advice = over $21,000. Our biggest accomplishment for Year #2 was the fact that we didn’t take on debt in meeting any of these expenses. We paid for each outright.

Year #3: $45,000 – The year of steady effort and no major expenses.

Year #4: $27,000 – Our lowest year in terms of debt-reduction numbers, but I think it’s been our best year yet.

Here’s why:

Renovations paid outright

After we paid off the last of the business debt in the summer of 2015, we went ahead with our plans to renovate. DH’s home business office had long been too small, and we re-jigged our house to better accommodate it. The combined living room and dining room space became his office. His old office became a TV room. Our family room became a dining room with a sitting area.

These changes included electrical work, new flooring, new office equipment, and new furniture. Although DH installed the hardwood and did the electrical work himself, and although we shopped carefully, it was an expensive undertaking – coming in at about $12,000. It was a practical move, but also an allowed indulgence. We’d had the same furniture and carpeting for 17 years, and they’d had heavy use at the hands and feet of three growing daughters over that time. Everything was WORN, and we were more than ready for a change. If we hadn’t been on our journey out of debt, we would have bought new furniture much earlier. Instead, we waited until we had paid off all non-mortgage debt AND saved up enough to pay for the renovations and furniture outright.

Emergency fund almost full

We finished our renovations in December, and in January, we ramped up our savings for our big emergency fund. According to Dave Ramsey, a mini-emergency fund of about $1,000 is needed before any debt-reduction begins. The mini-emergency fund keeps unexpected expenses, like car repairs, from being a ticket back into debt. Once all non-mortgage debt is paid off though, it’s time to save for the big emergency fund – “to protcet yourself against life’s bigger surprises like the loss of a job.”

DH and I calculated how much we would need if he suddenly wasn’t able to run his home business – for whatever reason. We figured out how much we’d need to cover the expenses involved in closing the business and to see us through 6 months – either to sell the house and downsize or to give him time to find other work – and we actually reached that number in May . . . but then had to dip into it . . . so it isn’t quite full yet.

Our May “emergency” resulted from DH’s extremely low business revenues for the month. DH’s income varies wildly from month to month, and May was his lowest one ever. To give some perspective, his revenues for May of 2016 amounted to only 16% of his revenues for June of 2015 (his highest month ever). The low income was easily supplemented by our savings, and although it would be nice to say, “We now have a full emergency fund,” it’s a wonderful sign of our new financial reality that we can say, “We were prepared for the unexpected, and what would have been a major stress a few years ago was barely a blip.”

Funding DD2’s living expenses

Another thing we did last summer after having paid off the business debt was to grant DD2 her long desired wish to move out and live closer to campus for her last two years of university. Our house is in the suburbs, and her school is downtown. Taking the bus to and from campus wasn’t such a big deal, but she’s also on the track team, and getting to the indoor track for training through the winter months would sometimes take as long as 2 hours. Add to that the need for part-time work, and it all just amounted to a draining lifestyle for everyone concerned.

It’s a hefty amount we give her each month to pay for her part of the rent in shared student housing and to cover her groceries, but it’s been worth it to foot the bill. And we’re maintaining firm boundaries in our financial support. We’re not enabling any poor money management in her. A couple of weeks ago, DD2 lost her job. It wasn’t her fault, and everything in me wanted to rescue her. But we held our line and were prepared to have her postpone her final year if necessary. No need to go there though! DD2 applied like mad to as many places as she could, and three days ago, she was accepted to a new position. Better location. Better pay. Better job. Better hours. Win-win-win-win! DD2 can walk to classes and cycle to work. She takes an easy bus ride to her training. She has had her best academic year to date, and last week-end she got a personal best time in one of her track events. She’ll be heading to Nationals next month.

More good news about our kids

Forgive me for bragging about my kids, but I really want to point out the inter-generational ripple effects of good financial health.

DD1 gained what I might call a “negative benefit” from our years of financial stress – which were characterized by unemployment and debt. She decided as a teenager that she would not make our mistakes. She has managed her finances carefully since that time, and she graduated without student debt three years ago. Eager to impart to her a “positive benefit” after starting our journey out of debt, I advised her to save 15% of her gross income once she started working. “What am I saving for?” she asked at the time. “I don’t need a car, and I don’t want a house.” I promised her that she would eventually want something, and that she would be very grateful for the savings. 15% of a low income adds up over three years, and this year, DD1 did indeed want something: She wanted to go to law school. This September, she will. And it looks like her first and second years will be covered by a combination of savings, scholarships, and part-time work.

DD3 had the benefit of being still quite young when we started to get our money act together. She’s heard more than she has cared to hear about the importance of delayed gratification, the ability say “no” to friends who always want to spend money, the freedom of choice that results from saving . . . When she started her first part-time job last summer, she automatically put 50% of her pay into a savings account – without being told to do so. She has some as yet uncertain goals for her savings – like living in a different city in a few years – and some very certain goals – like flying out west to visit DD1 for two weeks in July. As for a future career, she informs me on some days that she’s going to be a bar tender. On other days, she leans more towards working in the community with the developmentally delayed. She is free to choose her path as far as we’re concerned. And she’s setting herself up to have that freedom of choice. DD3 is experiencing the power of her own good management of her personal finances. And she’s still in high school.

Yes, our best year yet!

So although we paid off less in Year #4 than we did in each of the first three years of our journey out of debt, it’s been a great year! Our past of poor financial health is giving way to a strong present reality, and it’s opening up doors to our future – and into the next generation.

prudencedebtfree

Happy Anniversary! Glad to hear it was the best year yet! I know the feeling. Even when we hit our job loss bump last year, because we had our finances in order we felt in control. So great to see everyone including your daughters benefiting from this journey. Can’t wait to see what year five brings! That’s a good looking cake! 🙂

I wish I could say it was a cake that we actually ate! This time, I used a stock image : )
You were prepared for a much bigger emergency than we’ve had to deal with so far in our debt-reduction. I am so happy that the benefits of our new money discipline have rippled out to our kids – as I’m sure you are in your case too. Thank you, Brian.

Huge congrats on your fourth anniversary of your debt payoff journey and all the progress you’ve made. That’s also wonderful you’re able to help your daughter with her living expenses while she’s in school and training on a college sports team. Congrats on her heading to Nationals! And on your other daughter saving up and heading to law school. Passing on your new financial values is a huge victory.

We used to live in a constant state of being maxed out, and it made every bump in the road so jarring. It is wonderful to experience the smoother ride that was actually available to us all along. That’s the blessing I wish for our daughters. And it’s what you have set yourselves up to enjoy from the get go. Thank you very much, Kalie.

Wow such amazing news all around. I love to see where people started to where they have come. I’m so proud of you AND your entire family!! It seems the discipline payed off for everyone in some way. So happy for you!

I still struggle with some aspects of that discipline, but the good news is that we haven’t had to be perfect to make strides in the right direction. Thank you so much, Tonya. You’ve been a great example and support all along : )

Congratulations! I loved hearing about your daughters’ financial (and other) successes. Obviously, you have been great role models and very open about money with them. You should be so proud of where you all are!

Here’s hoping my kids will do the same. I’m not seeing it with my 15 year old son yet, but I’m hopeful once he starts earning his own $$, he’ll start respecting it more…we’ll see!

“great role models” – that gives some pause for thought. We were actually pretty bad with money for most of our adult lives – including years of child rearing. If we have been great role models in any way, I would say that it has been in facing the error of our ways and taking ownership of it so that we could proactively build a different future. I think some parents are afraid to admit to their mistakes in front of their children. All the best with your son, Amanda. 15 can be very tricky!

Congrats! We are still fighting our way out of debt with credit cards, student loans, and two mortgages. It’s always inspiring to see that success is possible is in a fairly short amount of time . . . and with kids! Keep up the good work 🙂

Thank you, Harmony : ) I’m so glad you have found inspiration in our story. It sounds like you’re dealing with a big load of debt – just like we have been. “How do you eat an elephant?” goes the saying. “One bite at a time.” All the best as you keep biting!

What a positive article – I can sense your heightened anticipation of hitting the end of your debt reduction journey 🙂 Are you planning on teaching summer school again this year, or taking a well deserved rest from work? So inspiring to hear about your three daughters’ financial wisdom – you and your husband have taught them some valuable life lessons about finances. I will be cheering you on from the sidelines over the next couple of years on your race to the finish line. Enjoy the ride and more importantly – the VICTORY!

Thank you, Nancy. I am going to take this summer off – and I’m REALLY looking forward to it : ) You don’t know how much I appreciate your cheering us on. You’ve taken this road to victory yourself, so I know that your cheers come from the fact that you can relate to our stage of the race.

I’m hoping to have a happy report at the end of the year: At least a little money in savings (after the heinous oral surgery bills) and a better-funded retirement account. It strikes me that I have small goals. But I’ll take it!

It’s all about the small goals! Our $150,000 debt payoff is the combination of a multitude of small goals – and there are many more ahead. I too hope that you have a happy report at the end of the year : ) Thanks, Abigail!

Wow. I just binged on your entire blog over the past 36 hours. You have an incredible story and I’m very impressed with the progress you’ve made, and your willingness to be honest and transparent about the entire process (good and bad). My husband and I are currently building our emergency fund as well, as I am planning to leave my corporate job soon to pursue a side business that I plan grow to a full-fledged business. Your struggles with covering your husband’s wildly fluctuating self-employment income have given me much to think about as I prepare to make a step to that life. Thank you so much for the work you’ve done

Ben, I’ve got to say I’m mighty stoked to know that someone has “binged” on my blog : ) Thank you so much for letting me know that it is an encouragement for you. I wish you very well as you pursue self-employment. There are definitely risks, but if you limit them to certain boundaries – with eyes wide open – you’ll be able to manage the ups and downs of the transition. For instance, we risked about $100,000 and the possibility of having to move into a less expensive house if my husband’s business failed. Not what we wanted, but not the end of the world. As it turns out, our scenario has turned out much, much better than the “worst case” for which we prepared. Thanks again, and all the best!

Believe me, your blog is well worth reading in its entirety. The big picture all at once was very enlightening. I did the same with MMM’s blog; also well worth reading the whole thing. I have several online heroes that I follow and I am happy to include you in their number. While I don’t agree with everything he says, I have a great deal of respect for Dave Ramsey as well. Ramit Sethi has some solid ideas, especially with regards to more modern tools to aid financial stability. Tim Ferriss, Seth Godin and Gary Vaynerchuk are worth following from the perspective of a Total Self Makeover, as it were.
Anyway, thanks for your words of encouragement as I get ready to step away from corporate life. It’s exciting and intimidating all at the same time, but I feel deep inside it’s the right move for me. Thank you again for your example

“Online hero” . . . I like it! I am not familiar with some of the names you have mentioned, but I’m interested in checking out what they have to say. The PF bloggosphere is fortunately huge enough for each of us to find at least a few voices that manage to speak effectively to our personal journeys. Again, I wish you well on this next segment of yours.

I’m so sorry I missed this post! I didn’t realize you were posting over here again. ARGH! Happy Anniversary you guys! It sounds like there have been great benefits to all that you’ve learned for the entire family. May God bless your family and finances always! 🙂

Kay, you didn’t miss the post! Look – you commented on it : ) I usually link my posts to Fruclassity, but once per month, I write an update on our situation over here at Prudence Debtfree – part of my scaling back efforts after the too-much-computer-time neck injury. Thank you so much!

I know but I don’t like being late to the party. I’m secretly always trying to beat Brian to the comments, but he’s so fast! 😛 So glad you’re feeling better and I’ll be sure to check back here often. I never have been able to find a subscribe button in here OR in Fruclassity. Help! :

I didn’t know you were so competitive! But it’s true – you and Brian are almost always the first to comment. I’ve got to get on that subscribe thing. (I thought there was one at Fruclassity. I’ll get on that too.)

That’s an impressive paydown rate! Our only debt will be our house which we will owe about $60,000 for once we finish it in two months. It largely depends on my income, but we should be able to pay it off within 2 to 8 years.

If we remain self-employed it will take a few more years until my side hustles turn into full-time hustles, or if I get a regular job it will be a lot less time. Either way, it’s nice to know we don’t have the traditional 15 or 30-year timeline like most homeowners.

Josh, you and your wife are in a fabulous position. You are younger than my husband and I are, and despite the modest income you describe yourselves as having, you’ll be completely debt-free relatively soon. I’m cheering for the 2-year timeline, but I know that’s really out of your control. All the best with the success of your business (or is that businesses?)

I’ve seen you around the blogosphere occasionally and have never had a chance to read your blog until today, and I’m so glad this was the post I landed on. Your financial progress is wonderful, congrats! But may I, as a somewhat nervous mother of a toddler knowing we have the responsibility of teaching said toddler about money someday, congratulate you on what I see as a far greater accomplishment: communicating your mistakes and learned lessons to all of your daughters in a way that they’ve internalized it positively.

I had both positive and negative role models in money while growing up and the one thing I marveled at was the decision that some kids made to ignore their parents’ good examples as being “too restrictive” instead of appreciating the free (and pain free!) lessons, and finding themselves in unnecessary straits.

I was one of those kids you would have marveled at, Revanche! My parents were very frugal and never felt they were doing without. I got seduced by the Yuppy image that was prevalent in the ads and movies of my early adulthood – and by the higher standard of living that many of my peers at university saw as “normal”. The “unnecessary straits” resulted – and I’m hoping my daughters will never have to face them. Thank you so much for stopping by, and for your encouraging words. Much appreciated : )

Wow. That’s a great news. I admire and love to see, listen, and read people’s determination in eliminating their debts. I love it because these people like you prove that coming out of a mountain of debt is possible.

Thank you, Allan. It IS a mountain, and it IS possible to come out of it. Too many people compromise their lives in feeling powerless about their mountains of debt. My hope is that more and more will feel inspired to take those mountains on.

Hooray! It’s funny how sometimes numbers don’t show the entire picture. I’m glad that your year went so well and that your progeny have benefitted from your tenacity. Your story is inspiring, nearly shed a tear over here 🙂

It makes my day when I hear that our story has inspired someone – and it’s a bonus if a tear is shed : ) You are right in saying the dollar amounts don’t tell the whole story. There’s a whole lot of humanity happening behind those numbers.

Congrats on a great 4 years! We recently thought we were debt free until we realized that our parents were carrying some of our debt (parent-plus loans and car loans). They never expected us to pay them back but I don’t feel right not paying for it so we’re taking over those loans. So frustrating that we’re back in the hole but it’s the right thing to do.

I REALLY admire you for taking on those debts. If your parents want to give you a gift, I don’t think there is any problem in accepting it, but if they’ve taken on debt to do so . . . I understand why you have decided not to accept that. This will only increase your aversion to debt in the future, so although it’s frustrating, it’s a good thing. Thanks so much for commenting, Julie!

Oh my! That’s a great amount of debt to put down, Prudencedebtfree. Congratulations! It really shows that you have really learned from that experience/mistake. Cheers to another year of being debt-free!

More like 3 years to go : ) We’d have to be earning a whole lot more than we are to pay off the remaining $100,000 in a few months. Still we’re way over the half-way mark, and the finish line doesn’t seem impossibly distant. Thanks, Larry.